Renminbi

Following last night's bond bloodbath, The Fed fallout continues in China as The PBOC has devalued the official Yuan fix the most since Brexit to its weakest level since May 2008, breaking above 6.95/USD. Since the "one-off" devaluation in Aug 2015, the Chinese currency has now weakened almost 14% against the dollar.

Overnight China responded and expressed "serious concern" after Donald Trump said the United States did not necessarily have to stick to its long-held stance that Taiwan is part of "one China", calling it the basis for relations. Beijing warned Trump that the two countries will have “nothing to discuss” if the incoming administration decides to discard the four-decade old “One China” policy.

Overnigt China disclosed that, as expected, FX reserve liquidation has spiked with reserves falling by nearly $70 billion last month as the country’s central bank burned through more of its reserves in the fight to defend the renminbi from greater depreciation on the back of accelerating capital outflows. This was the largest decline since January.

China’s central bank will limit the amount of renminbi that Chinese companies and individuals can remit outside the country, imposing a cap for the first time in more than two decades to stem the yuan’s outflow as the currency plumbs daily lows.

One might think that after 92 years, some wisdom may have leaked into the brain of Zimbabwean president Robert Mugabe. But no. As the world's oldest head of state, he has overseen the demise from a post-colonial success to a pariah state wrecked by hyperinflation. However, having apparently learned no lesson from his prior experiences, The Reserve Bank of Zimbabwe has decided to print a new national currency for the first time since 2009.

While the Renminbi basket (Chinese currency basket relative to biggest world trade partners' currencies) has been 'stable' for almost 5 months, the catchdown in the Yuan's purchasing power against the US Dollar is accelerating rapidly. Busting through 6.90/$ in early Asian trading, the last time offshore Yuan cratered this quickly, stocks plunged in January. The question is - how much further can the Yuan fall before the Trump bump gets damaged?